Court of Appeals Digest

By Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

| Administrative Law | Civil Procedure | Commercial Law |
| Contracts | Criminal Law | Criminal Procedure | Employee Benefits |
| Insurance | Municipal Law | Torts |

DNR - Navigable Streams - Chapter 227 Administrative Challenges

Turkow v. Wisconsin Dept. of Natural Resources, No. 97-1149 (filed 13 Jan. 1998) (ordered published 25 Feb. 1998)

In 1994 the Department of Natural Resources (DNR) advised the plaintiff that two walkways and a fence obstructed a navigable stream on his property and ordered him to remove all three structures within 45 days or face a citation. The plaintiff did not pursue any administrative remedy available under chapter 227 of the Wisconsin Statutes and one of the issues on appeal was whether the circuit court should have granted DNR's motion to dismiss a declaratory judgment action brought by the plaintiff. In that declaratory judgment action the plaintiff was seeking a declaration that DNR lacked jurisdiction to make orders regarding the stream.

In a decision authored by Judge Cane, the court of appeals concluded that, based on state sovereign immunity principles and chapter 227 of the Wisconsin Statutes, the proper method for challenging the DNR's navigability determination of the stream on the plaintiff's property was to pursue relief afforded under chapter 227.

The principle of state sovereign immunity is clearly established and this immunity has been extended to state agencies. Plaintiff must point to a legislative enactment authorizing suit against the state in order to maintain his or her action. The consent to sue a state agency is set forth in chapter 227 and constitutes the exclusive method for judicial review of administrative agency determinations. The record in this case established that the plaintiff did not pursue any remedy available under chapter 227 and, accordingly, the DNR's motion to dismiss his declaratory judgment action should have been granted by the circuit court on that basis.

Issue Preclusion - Nonmutual Offensive Use - Invocation Against Government Agency Defendant

Gould v. Wisconsin Dept. of Health and Social Services, No. 97-2602 (filed 29 Jan. 1998) (ordered published 25 Feb. 1998)

Gould received a lump sum payment for retroactive Social Security Disability Income (SSDI) benefits while she was receiving Aid to Families with Dependent Children (AFDC) benefits for herself and her son. A Department of Health and Social Services (DHSS) hearing officer decided that Gould was overpaid AFDC benefits as a result of that lump sum payment and was properly terminated from AFDC; and that her subsequent application for AFDC benefits for her son was properly denied. Gould appealed the circuit court's order affirming that decision. Among the issues before the court of appeals was whether the doctrine of issue preclusion should have prevented DHSS from litigating the question of the plaintiff's AFDC eligibility under the facts described above when two prior circuit court decisions involving different plaintiffs decided the same issue adversely to DHSS.

In an opinion authored by Judge Vergeront, the court of appeals concluded that issue preclusion did not apply in this case. In Northern States Power Co. v. Bugher, 189 Wis. 2d 541, 525 N.W.2d 723 (1995), the Wisconsin Supreme Court adopted the terms "claim preclusion" and "issue preclusion" to replace the terms "res judicata" and "collateral estoppel." Issue preclusion refers to the effect of a judgment in foreclosing relitigation in a subsequent action of an issue of law or fact that actually has been litigated and decided in a prior action.

Here, Gould recognized that she was not a party in the prior cases as to which she wished to assert issue preclusion, but contended that issue preclusion was nevertheless appropriate under Michelle T. v. Crozier, 173 Wis. 2d 681, 495 N.W.2d 327 (1993). Crozier held that trial courts may apply issue preclusion when invoked by a plaintiff (offensive use) who was not a party in the prior litigation (nonmutual use) against a defendant who was, if application of the doctrine is fundamentally fair to the defendant. The court listed several factors to be considered in the fundamental fairness analysis.

Gould argued to the court of appeals that under the Crozier factors, it was fundamentally fair to apply issue preclusion against DHSS in this case. DHSS responded that the defendant in Crozier was a private party, not a governmental agency; that there is no authority in Wisconsin for using offensive nonmutual issue preclusion against governmental agencies; and that there is persuasive authority from other jurisdictions against this.

The court of appeals concluded that a state agency's position as a litigant is sufficiently different from that of a private litigant such that the economy of interests underlying a broad application of issue preclusion do not, as a general rule, justify the nonmutual offensive application of the doctrine against the agency. The court indicated that it did not need to decide whether there are any circumstances that might justify applying the doctrine against a state agency and, if so, what they might be. It was satisfied that the case before it did not present circumstances that would justify the creation of such an exception.

Summary Judgment - "Four-corners" Rule - Insurance - Business Exception

Monfils v. Charles, No. 97-1158 (filed 21 Jan. 1998) (25 Feb. 1998)

Thomas Monfils was killed by coworkers at a Green Bay paper mill. His widow and children brought a civil action against Marlyn Charles and his homeowner's insurer. Charles was the paper mill's union representative who allegedly counseled the disgruntled coworkers to "confront" Monfils over his behavior. The complaint alleged that Charles was negligent in the handling of the matter. The circuit court granted the homeowner insurer's motion for summary judgment and dismissed it from the case.

The court of appeals, in an opinion by Judge Myse, reversed. First, the trial judge erred by "looking outside the four corners of the complaint" to determine whether the insurer had a duty to defend its insured. Specifically, the trial judge examined an affidavit because the pleadings were ambiguous. A 40-year-old A.L.R. article, cited in the case law, at "first blush" supported the argument that "a court can review extraneous materials in considering coverage issues when the complaint is ambiguous or incomplete," but a "closer look at the article reveals that, in fact, the opposite is true." Thus, where a complaint is ambiguous as to coverage, the court cannot look to materials outside the complaint to determine coverage.

Second, the evidence was insufficient to warrant summary judgment on the ground that the business exception vitiated coverage. The record clearly demonstrated that "Charles's primary occupation was as a paper worker, not a union president." Although observing that the facts must be more fully developed at trial, the court noted that Charles's union presidency was an elected post that involved "intermittent duties," "nominal compensation and the lack of a profit motive."

Lien Priority - Wage Claim Lien

Pfister v. Milwaukee Economic Development Corp., No. 96-0314 (filed 13 Jan. 1998) (ordered published 25 Feb. 1998)

In June 1994 Pfister filed a wage lien claim against his former employer, PAL, alleging that PAL owed him more than $200,000 in unpaid commissions and penalties. Years before, First Bank and the Milwaukee Economic Development Commission (MEDC) perfected security interests against PAL for about $750,000 in debts. The bankruptcy court established that PAL's assets amounted to no more than $350,000. A trial judge determined that under the 1993 amendments to sections 109.03(5) and 109.09(2) of the Wisconsin Statutes, "an employee's wage claim lien is a 'superpriority lien' taking precedence over all other security interests (except those excluded by the statute), including all security interests perfected prior to the date an employee's wage claim lien is established." The judge also concluded, however, that the statutes could not be applied retroactively.

The court of appeals, in an opinion written by Judge Schudson, affirmed in part and reversed in part. First, it agreed that "secs. 109.03(5) and 109.09(2), Stats., as amended, do establish that an employee's wage claim lien has priority over all other liens (except those explicitly excluded by statute), including preexisting ones." The 1993 amendments effected no substantive changes; rather, they "simply added an enforcement mechanism to a previously established right, thus producing a procedural change." Thus, the amended statutes apply retroactively. The court rejected First Bank's and MEDC's argument that the amended statutes unconstitutionally impaired preexisting contracts. Their "contracts with PAL still carry the unaltered right to enforce their security interests. Their contracts, however, could never include any implied right to somehow elevate their liens over wage claims liens given priority under sec. 109.09(2), Stats., both before and after the amendments."

Second, the court addressed First Bank's challenge to the trial court's finding that "the amended statutes do establish that wage claim liens have priority over pre-existing liens." The court of appeals concluded that under section 109.09(2) "'all' means 'all.'" Thus, the statute gives employee wage claim liens priority "over all others."

Judge Fine concurred, pointing out several issues that the majority decision did not, in his opinion, decide.

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